Retail sales volumes fell by 1.4% in March 2022, latest ONS data shows

Retail sales volumes fell by 1.4% in March 2022 following a fall of 0.5% (revised from a fall of 0.3%) in February 2022 but sales volumes were 2.2% above their pre-coronavirus (COVID-19) February 2020 levels, the latest figures from the Office for National Statistics (ONS) shows.

The largest contribution to the fall came from non-store retailing in which sales volumes fell by 7.9% over the month following a fall of 6.9% in February; despite these drops, sales volumes were 20.3% above their pre-coronavirus February 2020 levels.

Food store sales volumes fell by 1.1% in March 2022 and have fallen each month since November 2021; higher spending in pubs and restaurants linked to reduced coronavirus restrictions, as well as the impact of rising food prices on the cost of living are possible factors for reduced spending in food stores.

Automotive fuel sales volumes fell by 3.8% in March 2022 with other data sources indicating that some non-essential road travel had been reduced following record high petrol and diesel prices.

Non-food store sales volumes rose by 1.3% in March 2022 because of growth in other non-food stores (2.9%), and household goods stores (2.6%) such as DIY stores.

The proportion of retail sales online fell to 26.0% in March 2022, its lowest proportion since February 2020 (22.7%), continuing a broad downward trend since its peak in February 2021 (37.1%).

Lynda Petherick, head of retail for Accenture in the UK and Ireland, commented: “Retailers expecting better times ahead post-pandemic will have been left dispirited this year as the skyrocketing cost of living has seen the sector move from one existential crisis to another.

“Good weather usually means sunnier times for retail, and firms will hope that the summer months can play a small part in stimulating waning confidence among a general public coping with the harsh realities of rising prices everywhere they turn. In reality, each day brings fresh warnings from business leaders that prices will likely continue to climb, driving consumer confidence in the wrong direction for retailers. 

“Retailers are having to contend with rising manufacturing and operating costs, while food retailers are having to cope with scarcity of certain products. Firms with clear oversight of their whole supply chain and strong relationships with their suppliers will be best placed to adapt to the challenges ahead.”

Commenting on today’s ONS retail sales figures, Oliver Vernon-Harcourt, head of retail at Deloitte, said: “Sales volumes and values tumbled for a second consecutive month in March by –1.4% and –0.2% respectively. These results point to consumers reining in their retail spending as the rising cost of living continues to bite.”

“Inflation on food, fuel and household goods is adding pressure to already squeezed consumer spending power. With UK consumer confidence falling steeply in the first quarter of the year, it could signal the start of consumers making some cuts as they pay more for essential items. Our data indicates consumers are spending less on large-ticket items, such as furniture and major household appliances as well as some other discretionary categories such as clothing and footwear. Of those who are spending less, 54% indicate they are doing so to save money, 35% said they are choosing cheaper brands or stores and 25%are taking advantage of sales or discounts.

“The next few months will see further disruptions to supply chains and cost pressures. Consumers will also feel the pinch, particularly around discretionary spending, with April seeing the introduction of energy price cap rises and national insurance increases. The retail industry will need to balance increasing costs with maintaining customer engagement. It will be key to make sure the right products and services are available, and at a price point that meet consumers thriftier spending habits.” 

Silvia Rindone, EY UK&I retail lead, comments: “March was another challenging month for retail, with consumer confidence staying low. Non-food sales went up, signalling that consumers are treating themselves by going out more and starting to travel again. However, we expect discretionary spending to come under pressure given the combination of increased energy bills, the National Insurance rise and the other inflationary pressures that face consumers. And despite the warm spell at the end of the month, which usually encourages people to get out and about, consumers are still carefully watching their spending.

“Looking ahead, we expect sales to have stabilised a little in April as the weather improved, particularly over the Easter bank holiday weekend. EY’s latest Future Consumer Index found that two-thirds of UK consumers are worried about their finances, and many will be looking to make smart choices about their spending, focusing on retailers that offer the best value for money. Retailers will need to ensure they address these concerns and be very clear about the ‘value for money’ proposition they offer to consumers – trying to be all things to all people is a risk.

“Continuing supply and cost challenges, including rising freight costs and stock delays are also putting direct and indirect pressure on retailers’ margins, with the late arrival of seasonal stock forcing heavy discounting and the increasing expense and difficulty of employing staff leading to warehouse delays. It’s vital that retailers focus on operational resilience and optimising working capital to weather the challenges ahead for the UK retail sector.

“The ONS data also showed that online sales have decreased again, yet levels are still consistently higher than pre-pandemic. There is no doubt that digital transformation is here to stay, but consumers still want that physical retail experience as well. Retailers therefore need to work to understand the dynamics between online and offline channels and getting the proposition right for consumers.”